Performance management

Introduction

The performance management system has been evaluated several times during the last twenty years and further developed according to the results of the evaluations. The latest development measures have been implemented during 2014-2015. These measures aim to make the system more strategic, lighter, more horizontal and more joined-up.

The Finnish performance management model’s core is the agreement between the ministries and the agencies. The Ministries and agencies negotiate and then agree and sign a performance contract. Reporting and follow up are also important parts of the process.

The performance prism has been created to describe the framework for target-setting and accountability.

Performance management’s main purpose is to find balance between resources and targets.

In Finland the ministries are responsible for the performance of their respective administrative fields. Ministries should ensure that proper performance targets are set, also for their own operations, and that the agencies present true and fair information on the outcomes of their operations in their annual accounts. Social impacts and outcome targets are emphasised for the ministries’ performance targets. Operational performance targets are emphasised for other agencies and institutions. The fact that the principal concept is always generating added value for the agency’s customers and for the society as a whole has been equally emphasised.

The targets set should be connected with the respective operations and resources as closely as possible. Alongside with the positive performance targets set, also the unintended or side effects of the set targets should be taken into consideration. Performance targets are primarily set as indicators and only secondarily as verbal targets.

It is generally accepted that performance targets do not need to cover the entire range of operations; instead, the performance agreement can focus on the most important points and results. However, the guiding principle is that performance targets apply to both the agency’s basic operations and its’ development measures.

The core instruments of the performance management

The annual state central government budget is both the principal fiscal policy document in the public sector and a key document in performance management. The budget combines fiscal control with the managerial foundation of central government service production. The performance targets are explained to Parliament that has the authority to decide on the budget, in the context of and explanation to the budget appropriations.

The performance agreements between sector Ministries and their agencies on the respective administrative sector are the core of the system. They are not legally, but a morally binding; document of mutual understanding

Performance agreements between ministries and operative actors, government agencies

are drafted in early Spring together with both partners

conducted and signed in early Autumn after the budget bill has been forwarded to the parliament

Amended after budget decisions if needed

Published in a common database to which there is free entry for everybody (www.netra.fi)

In the dialogue leading to the contract the parties of the negotiations are the Ministry, represented by highest permanent officials and the Agency, represented by Director General. Preliminary discussions take place during the fiscal year by budget and substance experts of both organisations.

There are also yearly performance reports in connection with the final accounts of the fiscal year

Different report from every agency (output level)

Ministry report concerning it’s whole domain (outcomes)

Government report to the Parliament (outcomes from the political accountability point of view)

The Finnish performance management system allows for the agencies to chose their management method. It does not stipulate any particular management methods - all available tools can be used e.g. BSC, EFQM, CAF, CobiT etc.

Every ministry is obliged annually to issue a statement upon all of the performance reports in it’s domain. In the statement the ministry gives it’s opinion concerning actions needed because of the rate of the fulfilment of targets. All the statements are published in the same database where the agreements can be found as well.

In the Finnish performance management system each ministry can freely opt for the indicators it uses, in targeting the activities both for outcome and output levels and to be followed in reporting. Indicators are required to be based on measurement or in systematic evaluation.